Bargain-hunting consumers increasingly opt for reliable branded
frozen products. But all is not well on the production side, as prices
have collapsed under the waves of cheap cod from Russian and Norwegian
vessels. Near-term prospects for a rebound are not good.

Which way now for the frozen seafood industry in Europe? Some
answers, and certainly a lot of questions about the subject, were aired
during the first edition of the European Seafood Show and Conference
held recently in Brussels. Sponsored by organizers of the International
Boston Seafood Show, the venue provided an ideal forum to assess the
state of the Continent's fishery product markets and forecast what
can be expected to take place in them in the near future.

At the conference, speaker after speaker came to the dais, armed with
impressive charts and statistics, to deliver a similarly-themed message:
1992 had been a bad year. This represents a fundamental change in the
underlying trend for seafood, which alone among all the food groups has
shown consistent growth in the EEC during the past decade.

Individual seafood markets have all been affected in similar ways by
the recession which gripped Europe last year. Consumers, confronted by
the economic downturn, decided to cut back on food spending. For
seafood, it meant that shoppers began demanding more value for money --
hence a marked preference for lower priced items. And since the average
consumer is no expert in discerning fish quality, proven products are
increasingly getting the nod. This gives added advantage to branded
frozen items over fresh products, as the latter have an image of
unreliability. Moreover, consumers are wise to the huge difference
between prices paid to fishermen and retail prices charged at the
checkout counter. But, being largely oblivious of the reasons for this,
they expect retailers to do something about it by bringing down sales
prices.

For the European seafood industry, however, the overall economy is
not the only problem. Big inflows of cheap Russian cod at the start of
1993, coupled with already dull demand, caused prices to collapse at all
levels. This led to the well publicized outbursts of anger by fishermen
in France, Germany, Great Britain, Denmark and Poland.

Sinking Prices

For the rest of 1993 and '94, the picture is likely to remain
bleak. The general economic scene in Europe remains lackluster, as
Germany will probably not settle digestive problems caused by absorbing
the DDR anytime soon. Indeed, unification-related debt is expected to
reach $363 billion by the end of 1994.

The short-term outlook is for increased offers of cheaper raw
materials including cod and pollock from Russia, double-frozen fillets
from the Far East, and hake from South America. This will keep pressure
on processors, since they tend to use FIFO accounting systems and
therefore defer adjusting their sales price until they have exhausted
their old high-priced stocks.

Leading off the conference's keynote speakers, Hans Heinrich
Petersen of Nordsee Frozen Fish acknowledged that aggregate European
consumption of frozen seafood has been stagnating since 1990.
Furthermore, he expects the 1992 figures to show a shrinkage. This is a
wrenching change from the 7.5% a year growth experienced since 1985.
Most countries reflect this trend in their national statistics.

Overall, the industry has a small number of leading firms: Unilever,
Nestle, Pescanova, Foodmark, Ortiz-Miko and Aliko. The problem is that
these companies combined still control only 53% of the total market, and
that none of them can claim to be in the leading position in all major
markets with their entire product range. This dispersal of distribution
channels and lack of a comprehensive marketing campaign accounts for the
sector's lack of direction and unclear image in comparison to some
other food protein groups.

Petersen, who is marketing/sales director for Nordsee, confirmed that
the long-term combination of high growth in demand at first ran into the
stagnant supply situation, starting around 1989-90. When it translated
to higher prices, the sector bumped into the market's negative
price elasticity, driving consumers to look for less expensive protein
sources. This forced processors to look for cheaper supplies (almost
impossible to find within the EEC because of the structural shortage)
which in the end were obtained by substituting relatively unknown
species and poorer quality products. That in turn disappointed
consumers, reinforcing their tendency to look for alternative protein
sources.

While Petersen stressed the need for industry cooperation to underpin
generic campaigns, he also identified market traits which will hamper
any such efforts. A major problem is the lack of uniformity, as
long-standing regional tastes are hard to change. Area preferences
usually relate to the color of the fish.

In Great Britain, people fancy cod. In France, consumers like saithe and Alaska pollock, while southerners prefer hake. For Germany, cod,
saithe and Alaska pollock are desired. Italy wants cod and hake, Belgium
prefers cod, Holland goes for saithe, and Spain prefers hake before cod.

Given such differences, Petersen urged major market players to
develop products targeted to these regional tastes. Try out the winners
in other regions, he suggested, and in this way develop truly
pan-European items. Such a program, of course, will require major
capital outlays for product development.

FRENCH MARKET

As one of the conference's keynoters, Bertrand Bonhomme,
marketing director of France Glaces Findus, pointed out that for the
French consumer fish has the advantage of having an image of healthiness
as opposed to most other protein sources. The industry's long-term
change away from fresh and towards frozen products has rendered seafood
a generic product, targeted at the convenience sector where it now makes
up 50% of dishes served in institutions.

Market penetration has at the same time led consumers to believe that
such seafood should be cheap, notwithstanding its traditional status as
an expensive product. This has put a cap on price rises beyond which
consumption simply falls off, making fish stand out from its competing
food sources where the product image is hardly affected by price
considerations.

Partly to combat currently unfavorable market conditions, Bonhomme
urged the industry to engage more in generic marketing campaigns
tailored to improve seafood's image, as well as spread product
knowledge and to broaden potential markets. These promotions should
focus on frozen seafood because it is distributed more efficiently than
fresh in mass markets.

Bruno Karpinski of FIOM talked about French distribution channels. He
noted that catering constitutes only 27% of the national market,
compared to 73% for retail. This is in line with most other European
countries but in contrast to the USA, where consumption away from home
is nearly two-thirds of the total. Fresh fish still accounts for over
half of all seafood consumed, against 21% for frozen. Contrary to most
other European markets, fresh fish actually gained ground in 1992
compared to frozen seafood.

Karpinski focused on the diversity of the French seafood scene,
referring to its very pronounced regional differences in consumption
patterns, distribution channel preferences, and product types. Frozen
seafood, together with smoked fish, is sold mostly through supermarkets.
Frozen items will also be found more away from the seaboard as well as
in the south.

Contrary to some other countries in Europe, seafood consumption in
France was up by about 5% in volume last year. Fresh fish advanced even
more -- up by 8% in volume and 4% in value.

Jean Louis Meuric of Davigel, a leading French distributor of fishery
products, related his firm's experiences in the catering market for
frozen seafood. In 1991, close to 200,000 metric tons was consumed in
France in frozen form, of which two-thirds was sold through catering
outlets. Davigel's share represents a volume throughput of about
80,000 tons (one-quarter of which weighs in as actual raw fish
materials), with a product range of about 650 items. Sales value is put
at 19 billion FF, of which about 5.5 billion FF (or approximately US$
800 million) is the fish's raw material value.

Meuric focused on the capacity of the seafood industry to come up
with new products, through utilization of unknown species. Compared to
10 years ago, many more fish items as well as suppliers are available
today.

Sales of traditional products in France (cod, Alaska pollock, saithe,
hake) have now reached a saturation point, showing no further growth
potential. They serve as a floor in the market, and are managed
together, since they are treated as interchangeable by the processors.
Whenever the market situation moves, the purchasers will shift to the
product offering the most value for money and in turn pack the
appropriate added-value products on the basis of that specific raw
material. Market growth is expected to come from new species, which will
at the same time cap any attempts at price rises for traditional items
such as cod and saithe.

According to Meuric, the lack of demand is the major factor affecting
business trends. Current cheap prices, which will probably fall further,
will not be sufficient to increase consumption volume.

Aquaculture's Potential

Jean Michel Adrien, director general of the Adrigel Group, addressed
the potential in France for aquaculture products -- in particular farmed
turbot. While explaining that the market expanded quickly (from 100 tons
in 1986 to about 3,500 tons estimated for 1995), he also pointed out its
limitations. After 1995, volume is expected to remain stable, which
together with the very high investment costs (about 11 million FF in fry
stocks and equipment for his group), will restrict the number of
participants.

Farmed products do offer the advantage of overcoming seasonal price
variations. In this case, the wild product commands a low price between
May and July, when the turbot are caught in greater quantities. The
aquaculture firms therefore target their production and sales for the
January to April period, when they can fetch the highest prices.

As buyers start to appreciate the standard of quality offered by the
farmers, it may lead to an extension of the market, with distributors
selling farmed turbot as a separate product instead of substituting it
for wild supplies.

Seafood Deli Items Gain

Didier Morineau, a journalist who covers the French seafood trade,
focused on the development of new products. This has been driven mostly
by the "charcuteries de la mer" (seafood delicatessen) group,
which was introduced by meat processors who diversified into the fish
sector by applying their specific techniques. The result is a meat deli
dish cuisine that has grown into an industry producing about 1,000
metric tons of finished products a year. No longer does the fare
represent just specialty items for the Christmas period. The demand is
year-round now.

The majority of those so-called "terrines" are sold through
supermarkets (60%) where they are merchandised at self-service and
traditional meat counters. The catering sector takes most of the
remaining share, both for collective food provision and for restaurants.
The most popular dishes are salmon-based.

This product group proves to be a good outlet for frozen fish
suppliers, as 95% of the raw materials are used in frozen condition. The
products preferred are Norwegian farmed salmon, whitefish fillets,
surimi, smoked salmon and octopus. Although good growth is forecast for
this segment, it will not advance in spectacular leaps, as it takes two
to three years to fully develop a product.

SPANISH MARKET

Jean-Babtiste Chassin of Angel Lopez Soto analyzed the Spanish
seafood sector. Spain is one of the largest markets for fishery products
in Europe, with per capita consumption exceeding 30 kg. a year. That,
coupled with the demise over the last 15 years of a distant water
trawler fleet, has turned the country into a net importer requiring huge
amounts of tonnage to satisfy demand. Seafood represents 12% of typical
household budgetary outlays, thus making it the second biggest food
expense after meat.

Spain is very much a traditional market, with fresh products
representing 44% of intake compared to 17% for frozen. Still, during the
last few years steady gains for frozen items have been posted. The
product range, though large, is dominated by hake, which alone accounts
for 70% of frozen consumption.

The market is not yet very sophisticated in terms of packaging, as
80% of frozen seafood consumed is sold in semi-processed (H&G) bulk
quantities devoid of meaningful added value. This fact shows up clearly
in the small market share of prepared frozen dishes (2% of total fish
consumption).

As in other European seafood markets, household consumption
represents the lion's share of volume: 80% of all fish consumed,
with most of it purchased at small shops. The supermarkets, which sell
mostly frozen products, claim a small piece of the fresh fish trade. A
problem to be dealt with in the following years lies in bridging the gap
in product knowledge between older and younger people that stems from a
lack of personal experience with fish and fish preparation among the
latter. As young households form and enter the market in increasing
numbers, distribution channels will have to allocate more production
facilities to turn out added value prepared frozen dishes.

ITALIAN MARKET

Herman van Herterijck of Sagit, a Unilever Foods company, estimated
that seafood consumption in Italy (which has grown from 13.5 kg per
capita in 1982 to 17 kg in 1992) will rise to 20 kg by the year 2000.
Consumption is concentrated on hake, cod, Dover sole, plaice and
shellfish. As in other European countries, fresh and chilled products --
although still retaining the lead -- are giving way to frozen items,
which in 1992 represented approximately 300,000 metric tons or about 25%
of overall volume. Frozen accounts for the greater share of catering,
which is hardly involved in the distribution of other seafood (always
less than 25% as compared to close to 75% at retail).

Because the retail shops have such a large piece of the action, the
complex and fragmented market imposes large distribution costs. Mr. van
Herterijck said that his firm has 2,500 trucks on the road to keep
stores constantly supplied.

One of the best reasons for being optimistic about the future of
frozen products in Italy is that 115,000 retail shops are now selling
frozen fish, while 15,000 outlets offer fresh/chilled products only. In
general, Italians eat fish in large measure during the summer holidays,
served either at dinner or as a main course. Fridays and the weekends
are peak consumption times.

There are also regional differences to be aware of. The center of the
country has a disproportionately large pattern of frozen fish
consumption compared to intake of fresh/chilled fish. The North is about
average, and those in the South and the Islands prefer fresh/chilled.
The higher and middle classes account for a greater than average share
of fish consumption, and the lower classes are more inclined to buy
cheaper species.

These factors serve to underscore the point that Italy is a complex
market in which to sell seafood. Making life even harder for
distributors was the devaluation of the Italian lira last autumn, which
will force the country to face reality and make painful economic
adjustments. It is not clear how this will affect seafood consumption,
but it will definitely upset some of the trends perceived so far.

Nevertheless, Mr. van Herterijck was willing to speculate on the
future. He sees market share for hake and shellfish-based products
increasing at the expense of cod and plaice. Farmed sea bass and sea
bream prospects are also bright, provided longer-term supply problems
are solved by the aquaculture industry. As the typical consumer has
limited personal knowledge of fish, he or she will come to rely more on
branded products. This factor, combined with the expected increase in
POS numbers, some consolidation in the distribution sector and the
continued expansion of the frozen product range, should offer frozen
seafood processors and retailers a good opportunity for achieving market
gains in the teeth of unfavorable economic conditions.

GREAT BRITAIN

Robert Kennedy of the Sea Fish Industry Authority analyzed the
British market for fishery products, where catering looms much more
important than elsewhere in Europe. Sales in restaurants and
institutions represent over 40% of total fish value, which was estimated
at worth |pounds~1.5 billion in 1992.

Because of the continuous price rises in recent years, caterers used
only 140,000 metric tons in 1992 compared to 220,000 in 1987. Another
example of the inordinate inflation is seen at the retail level, where
prices advanced by a whopping 122%. Nonetheless, seafood consumption
rose by 8%. Fish items now exact 5.6% of the British household budget.

Kennedy noted a series of trends in the UK that are also evident
throughout Europe: the consumer's perception that fish no longer
constitutes good value for money; supermarkets are increasing their
share (particularly for frozen value added and
modified-atmosphere-packed (MAP) items; seafood is bought more by older
and richer people; children represent a higher threshold of seafood
consumption; fresh fish has lost market share to frozen products.

Concerning frozen items, he stated that their share now claims about
60% of overall seafood consumption. The fish finger sector continues to
serve as a solid base, which is good and bad. This basic item
contributes a great extent to the perception that frozen seafood
products in particular are cheaper and of lower quality.

In Great Britain the multiples (supermarket chains) supply 81% of all
frozen seafood compared to 39% of fresh items. Caterers distribute
mainly through institutions (37%) and fish and chip shops (33%). The
latter are the UK's premier outlet for hot take-away food items.
Traditional species such as cod, haddock and plaice still account for
57% of overall seafood consumption, fish fingers for 11%, scampi
(Norwegian lobster) for 6%, and shrimp for 9%.

Kennedy did have some words of optimism to offer. He advised that due
to the general easing of Britain's long recession, the economy is
now picking up. This should translate into notably better sales figures for the catering business.

Slump in New Products

Mick Whitworth focused on seafood product development. He observed
that new launches in Britain dropped to 97 items in 1992 compared to
about 140 in 1988. This is still better than the meat market, where the
contraction was even more pronounced.

In Great Britain a particular preference has emerged for MAP
products, demand for which has sextupled over the last decade. In
particular, MAP packs in bulk now seem to be gaining ground. Meanwhile,
processors are constantly on the prowl for new ideas to try out on the
market. A very interesting concept that recently emerged is pizza fish
(cod with pizza-style topping) from Ross Youngs.

The ethnic markets have retained some interest, particularly for
processors catering to those partial to Asian cuisine. The company Wing
Yip has rolled out self-marinating fish steaks that are pre-packed with
a sauce that marinates upon thawing.

Whitworth also spoke of the resurgence of interest and competition in
the canned sector, where French processor Saupiquet has advanced with
innovative canned tuna items. This has prompted market leader John West
to launch its own product range (The Tugboats) to compete head on with
the cross-channel invader.

GERMAN MARKET

Achim Schon, managing director of Frosta, discussed recent
developments in Germany. While per capita consumption in the Federal
Republic has always been restricted, it has suffered a further decline
since the second half of 1992, when hot weather led to falling demand
and combined with rising new material prices to bring about a drop of
approximately 20% in processing volume. Seafood represents only
one-fifth the lofty level of German meat consumption. Nevertheless,
unlike meat, per capita intake is expected to increase, reaching about
20 kg by the year 2000.

Frozen fish is taking market share away from fresh fish, having
advanced from 12% in 1981 to 23% in 1992. However, because of price
sensitivity among consumers -- exacerbated by the general economic
recession, attempts to raise rates at retail levels last year and in the
beginning of 1993, and the expected decline in Germany's GNP --
consumption will at best stay level in 1993. Lower prices will be a
prerequisite for increased consumption.

Within that negative framework, there is still scope for expansion
for companies that are able to target specific niche markets. Examples
cited by Herr Schon included shellfish items (which are still gaining
ground thanks to better marketing) and prepared frozen dishes that meet
the growing need for convenience among small households.

Another expanding market segment is found in fish snack restaurants,
which advanced by 30% in the 1989-91 period, and managed to grow by
another 10% in 1992.

Frozen fillets continue to gain in popularity. The Frosta managing
director cited the case of the supermarket chain Aldi, which introduced
one fish fillet that captured 20% of the German frozen fish market,
leading to expansion for this segment from 19% to 21% of overall fish
consumption.

The Finfish Situation

Thies Pickenpack, managing director of Pickenpack
Tiefkuhlgesellschaft, took a closer look at the supply of finfish in
Germany. Herring, Alaska pollock, saithe, hake, ocean perch and bonito represent over three-quarters of consumption. The impact of worsening
economic conditions showed in the preliminary import figures for 1992,
which recorded a drop in finfish volume of 18% to approximately 110,000
metric tons.

Imports are dominated by pollock, hake and saithe, whose market
shares influence each other because of their interchangeability. For
instance, purchases of hake from Argentina and Uruguay gained
spectacularly in 1991 due to the high price of Alaska pollock and saithe
in particular (up 35%). In 1992, most of hake's gains had to be
abandoned in favor of Alaska pollock (which dropped in price), while
saithe continued a precipitous drop in consumption notwithstanding a
price decline of 23%.

Herr Pickenpack's closing remarks addressed what might be in
store. He suggested that the supply situation in Europe will be
determined by: the outcome of current attempts at cooperation between
the USA and Russia to manage Alaska pollock stocks; the evolution of the
Russian biomass in the Far East; access to fishing in the donut hole
zone. A positive factor might come from the acceptance by international
markets of currently unfamiliar and underutilized species from the North
Pacific area.

Ruth Conin, a seafood trade journalist, talked about the German
market for "Feinkost" products, which consist of bits and
pieces of fish mixed with vegetables, spices and sauces. Such items
offered great margins when first introduced 40 years ago. But nowadays,
more sophisticated customers expect higher quality at reasonable prices.

Because of specialization, the market is now also fragmenting.
Traditional products are increasingly being distributed through
supermarkets, while high quality items sell mostly via deli shops. Its
overall value is now estimated at about DM 1.8 billion, thanks to
explosive growth over the last 10 years. About 30,000 metric tons of
finished product are handled by the deli shops, and 10,000 tons by the
supermarkets. This nonetheless represents a 180% growth rate for
supermarkets since 1982.

The market is dominated by one of the original recipes: a salad and
mayonnaise blend with herring pieces. It claims about 50% of the
segment. The importance of the market has given rise to the
establishment of a number of specialized processors who are forced to
continuously develop new ideas. Customers are no longer satisfied with
only classic products, but want to be able to try new items from the
same source.

In Summation

While most European seafood industry members acknowledged that
problems will have to be overcome in the next 18 months, many of them
refused to abandon the optimism about future growth that has
characterized their business for so long. However, the next wave of
expansion may be much harder to generate than had been assumed over the
last decade.

Although the current influx of cheap raw materials from Russian and
Norwegian vessels (as well as from South America) might give the
impression that there are no supply constrictions for the European
seafood markets, longer-term forecasts and expectations inexorably point
to a supply bottleneck manifesting itself sometime in the next few
years. Those who manage to prepare themselves for this now by securing
longer-term supply contracts, as well as diversifying their product
range in close cooperation with retailers, will stand the best chance of
emerging by the turn of the century as part of a smaller but fitter,
more efficient and more profitable seafood industry.

New Zimbabwe Tilapia Farm Plans to Ship Fillets to Europe

Zimbabwe-sourced tilapia fillets will soon be exported to Europe
through a partnership between the companies Cairns and Groupe Gabriel.
The fish will be farm-raised on Lake Kariba, where a processing plant is
now being built. Most of the output will be marketed in the African
market, with some going to the EEC to earn hard currency.

Exhibit Hall New feature For NFI Convention in DC

The National Fisheries Institute (NFI) in the United States will hold
its 48th annual convention Nov. 3-6 at the Sheraton Washington Hotel in
the nation's capital. New to the program this year will be an
exhibit hall. Details are available by phoning the organizer at
703-524-8882.

Another Sealord Trawler Set to Fish NZ Waters

Sealord Products Ltd. expects to have its eighth stern trawler plying
the deepwater fishing grounds of New Zealand by August. It will be
equipped to go out to sea for up to 10 days at a time before landing
export-bound hoki, orange roughy and oreo dory for further processing in
Nelson and Dunedin.

The four-year-old vessel, renamed the Thomas Harrison, was purchased
in Greenland earlier this year. Some $10 million was invested in the
42.5 meter long ship, which has undergone a refitting of factory and
fish handling systems.

Editor's Note:

The author is managing director of EMMS bvba, a seafood consulting
concern specializing in import-export services and based at Kuiperstraat
85, B-9100, Sint-Niklaas, Belgium. He covered the recent European
Seafood Exposition and Conference exclusively for Quick Frozen Foods
International. More than 233 companies displayed their products at the
fair, which was attended by some 5,500 people from over 80 countries.

COPYRIGHT 1993 E.W. Williams Publications, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.